Recurring Deposits or RD are the deposits that allows a person to make deposit recursively at a regular intervals of time.
Recurring Deposit is best form of investment that is secure and helps build a huge corpus by small contributions every month . Most Banks provide a return of around six percent to seven percent on your recurring deposits. The returns are to happen for sure and you get a lump sum amount after the locking period is over.
Recurring deposits can be started at as small as 100 rupees per month and can be adjusted in multiples of 10. There is no upper limit set for your recurring deposits. Minimum locking period for recurring deposits is 12 months and can go up to 120 months as per your requirement. The investor can very easily extract a loan or an overdraft of 90% of available amount against his recurring deposit without having to disturb the ongoing investments.
Though it’s a safe investment but its fully taxable like any other fixed deposit until you can submit Form 15H under which you can be exempted or get your deductions returned. One can also dissolve his or her recurring deposits earlier than maturity period however there is a penalty applicable as per the norms in different banks where your recurring deposit was established. One need to nominate his recurring deposit to his relative while opening it and once you have successfully established your recurring deposit you will receive a passbook.
When a depositor fails to pay any installments of recurring deposit there is no reminders sent out by the bank for the same and a penalty charge may be applicable depending on your bank for non-deposit of that monthly installment. Its best to have a standing instruction through your net banking in your account to deficit the amount and submit it into your recurring deposit account.
Sometimes your bank may apply a service charge to process your recurring deposit, this service charge is as little as INR 10 per account.
In case the depositor fails to deposit six continuous deposits then the account will be closed on its own and the balance will be paid to the depositor’s savings account which is linked to that recurring deposit account.
One need to carefully go through all the instructions for disposal of maturity amount while opening a recurring deposit to avoid any confusions later.